On Our Radar

On Our Radar

Transurban Annual Profit Jumps, Forecasts Higher Distribution

SYDNEY – Transurban Ltd. (TCL.AU) said increased revenue from its toll roads helped to drive a steep rise in annual profit, as it continues to weigh a possible bid for control of the WestConnex highway in Sydney.

Continue Reading Below

Transurban, which owns roads in Australia and the U.S, said its net profit increased to 209 million Australian dollars (US$165.3 million) in the 12 months through June from A$22 million in the 2016 fiscal year.

Proportional toll revenue--the company's preferred measure of the performance of its roads--rose by 11% to A$2.15 billion in the fiscal year.

Directors had earlier declared a final distribution of 26.5 Australian cents a share, bringing its total payout to 51.5 cents, but said this is expected to rise in the year ahead.

"We have announced distribution guidance of 56.0 cents per security, implying growth in the 2018 fiscal year of 8.7%, said Chief Executive Scott Charlton.

Still, some analysts speculate the company will struggle to keep lifting payouts as spending commitments rise, including when financial close is reached on the West Gate Tunnel in Melbourne.

Continue Reading Below

ADVERTISEMENT

On Tuesday, Transurban cited Westconnex among potential opportunities in New South Wales state that also include the Beaches Link and Western Harbour Tunnel.

Transurban's interest in the Westconnex comes after New South Wales said in May that it wanted to sell at least a 51% stake in the highway to raise funds to complete the final stage of construction. The state government aims to gauge interest later this year, and is targeting a closing date for a transaction in mid-2018.

The Westconnex sale is the latest move by an Australian government to sell infrastructure assets around the country to pay for the construction of roads, rail lines, hospitals, schools and other developments. In May, New South Wales agreed to sell control of one of the state's largest power grids for A$7.62 billion.

UBS has estimated a 51% equity stake in WestConnex could be worth between A$2 billion and A$4 billion, depending on business scenarios. It expects Transurban to bid, partly to prevent a rival from establishing a foothold in Sydney.